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(Image credit: AFP via @daylife)

Back in 2009, when the U.S. Treasury agreed to bail out General Motors, one thing was made clear: money provided by American taxpayers must be used at home, to protect American jobs at American factories. That's why GM's bankruptcy filing involved only its North American operations; the rest of the global company wasn't affected.

The U.S. pumped a total of $49.5 billion into saving GM, winding up with 60.8 percent of the equity and $6.7 billion in debt when the carmaker emerged from bankruptcy in July 2009 with a healthier balance sheet and a much improved cost structure.

So how did U.S. taxpayers end up holding the tab for the failed turnaround of Opel AG, a German carmaker wholly owned by GM?

In 2009, GM had come close to selling controlling interest in Opel to a group led by Canada's Magna International. Germany had backed that plan, offering up to $6 billion to finance the takeover. But in November 2009, GM abruptly changed course after the board of directors concluded Opel's engineering expertise and European clout were vital to GM's global strategy.

Instead, GM asked European governments to help with Opel's restructuring. But by 2010, the German government, which had earlier provided a $1.5 billion bridge loan to Opel, wasn't feeling nearly as charitable toward an American corporation, and rejected its request for $2.2 billion in aid for Opel.

So in September, 2010, GM said it would commit up to $4.2 billion of its own money to finance Opel's "restructuring and ongoing cash needs."

The intercompany loan occurred at an interesting time: it was after GM had paid off the $6.7 billion it owed the U.S. Treasury but before it returned to the public stock market in November 2010. GM then was a private company in which the the U.S. government was a passive investor with a majority stake. It faced neither the scrutiny of Wall Street nor government overseers.

The loan disclosure in a 2010 Securities & Exchange Commission filing didn't seem to raise many eyebrows at the time; it was just something that was needed to finally right the ship in Europe, where GM was heavily invested.

But now, two years later, Opel is still a giant mess, and as Forbes contributor Micki Maynard wrote Aug. 2, GM's losses in Europe are threatening to sink GM's comeback. GM Europe, comprised mostly of Opel and its sister brand, Vauxhall, lost $617 million in the first half of 2012, on top of a $747 million loss in 2011 and a $1.8 billion loss in 2010. In all, GM has lost almost $17 billion in Europe since 1999.

Opel has overhauled its management, invested in new products, closed a factory and negotiated more flexible labor agreements with its German unions, but it's still not fixed. Further restructuring is expected, but so far, GM isn't saying what the next steps will be.

GM notes that Opel posted a $100 million pre-tax profit in the second quarter of 2011, but the economic problems triggered by Europe's sovereign debt crisis erased all of that progress. "The sovereign debt crisis and the recession that followed made a tough job even tougher. But we still believe with the right products and the right cost structure we can be successful in Europe and that is an important component of being a leading global automaker," said GM spokesman Jim Cain.

GM is not alone, of course. Ford Motor warned recently that it expects to lose $1 billion this year in Europe. Still, despite the headwinds, well-run companies like Volkswagen AG are able to remain profitable in Europe.

Why does all this matter? GM's European losses, along with its huge pension liabilities, are the two biggest factors holding down GM stock. (The same is true of Ford Motor stock, by the way.) GM went public at close to $34 a share. Today it trades for $20. In order for the government to finally wash its hands of GM, the stock will have to bounce back.

So far, GM has paid back $23.1 billion to the U.S. Treasury, including $6.7 billion in loans, $13.5 billion in proceeds from GM's November 2010 IPO, and $2.1 billion worth of preferred shares it purchased from the government in December 2010. But taxpayers still own 500 million shares of GM stock, which at today's price, are worth $10 billion.

I asked a spokesman for the U.S. Treasury, Matt Anderson, what the government thinks about GM continuing to sink money into Opel. He said Treasury hasn't had any say in the automaker's day-to-day decision-making since it emerged from bankruptcy.

But like all shareholders, he must be hoping GM is not throwing good money after bad.